Asbury Profit Falls as New-Vehicle Margins Narrow
Second-quarter revenue rose sequentially to $4.4 billion as dealership sales remained essentially flat from a year earlier.
The auto retailer Asbury Automotive Group (ABG) reported a 25% decline in second-quarter net income as weaker new-vehicle profitability and higher expenses weighed on results.
The quarter marked a sequential improvement in underlying performance after the first quarter, though earnings remained below year-earlier levels. Adjusted net income rose to $125 million from $102 million in the first quarter but fell 15% from $146 million a year earlier.
Revenue was essentially unchanged from $4.373 billion a year earlier, while gross profit held near $753 million. Diluted earnings fell 19% to $6.25 a share from $7.76, and adjusted earnings declined to $6.82 a share from $7.43. Adjusted earnings improved from $5.37 a share in the first quarter.
New-vehicle revenue increased 1% to $2.330 billion as a 2% rise in average selling price offset essentially flat unit sales. Gross profit from those vehicles fell 14%, however, as gross profit per unit declined 13% to $3,124 and margin narrowed 101 basis points to 5.9%. The weakness was concentrated among domestic brands, where unit sales fell 15%, while luxury and import volumes grew 6% and 5%, respectively.
Used vehicles provided a partial counterweight. Used-retail revenue fell 3% as unit sales dropped 9%, but gross profit rose 6% because gross profit per unit increased 16% to $2,002. That measure also improved from $1,847 in the first quarter, extending the segment’s run of stronger unit economics.
Parts-and-service revenue rose 6% to $635 million and gross profit increased 5% to $374 million, shifting more of Asbury’s gross-profit mix toward fixed operations. Parts and service accounted for 49.7% of gross profit, up from 47.2% a year earlier, while the new-vehicle contribution declined to 18.4% from 21.3%.
Expense pressure kept operating profitability below the prior year even as it improved sequentially. Adjusted operating margin rose to 5.3% from 5.0% in the first quarter but declined 50 basis points year over year, while adjusted selling, general and administrative expenses consumed 66.0% of gross profit, up 235 basis points. Its Tekion implementation had reached 70% of stores by July 28, with completion still targeted for the fall.
Asbury repurchased about 668,000 shares for $131 million during the quarter, keeping buybacks near the first quarter’s elevated pace. At the same time, transaction-adjusted net leverage increased to 3.4 times from 3.2 times as trailing 12-month transaction-adjusted EBITDA declined to $966.4 million.